Crypto lender Genesis to return $3 billion to customers in bankruptcy wind-down
Technology
Crypto lender Genesis to return $3 billion to customers in bankruptcy wind-down
NEW YORK (Reuters) - Crypto lender Genesis Global received court approval on Friday to return about $3 billion in cash and cryptocurrency to its customers in a bankruptcy liquidation, leaving its owner, Digital Currency Group, with no recovery from the bankruptcy.
US Bankruptcy Judge Sean Lane approved Genesis’ Chapter 11 liquidation plan and overruled an objection raised by DCG, which had argued that Genesis should pay its customers and creditors no more than what the crypto assets were valued at in January 2023, when Genesis filed for bankruptcy.
Crypto prices have risen sharply since Genesis filed for bankruptcy, and DCG and Genesis disagreed over who should benefit from the rise in prices. Bitcoin, for example, was worth $21,084 in January 2023, compared with its current price of $67,000.
Lane rejected DCG's objection, ruling that even if customer claims were capped at the lower prices, Genesis would have to pay many other creditors, including federal and state financial regulators that had asserted $32 billion in claims, before it was able to give money to its equity owner DCG.
"There are nowhere near enough assets to provide any recovery to DCG in these cases," Lane wrote.
Genesis is paying customers back in crypto where possible, but it does not have enough cryptocurrency to give back everything it owes.
Genesis attorney Sean O'Neal said Friday that the company disagreed with DCG's assertion that customers could be paid "in full" based on the lower cryptocurrency prices in January 2023.
"We don't buy into the idea that claims are capped at the petition date value," O'Neal said.
Genesis estimated in February that it would be able to pay its customers up to 77% of the value of their claims, depending on future price fluctuations.
DCG could not immediately be reached for comment late Friday.
